Rabin: U.S. Budget Cuts Will Affect Israeli Economic Recovery

June 18, 1986

TEL AVIV (Jun. 17)

Anticipated cuts in American aid as a result of the Gramm-Rudman-Hollings balanced budget amendment will affect Israel’s economic recovery and the Israel Defense Force, Defense Minister Yitzhak Rabin told a meeting of the U.S.-Israel Chamber of Commerce here Monday.

He noted that 70 percent of Israel’s defense budget is covered by U.S. aid — Israel pays only 30 percent — and any cuts would have tremendous impact, particularly on military training and development. “I don’t think there were forced retirements from the career army in the past like there are today. We’re speaking of thousands,” Rabin said.

He said that more than 10 percent of the IDF’s civilian employes have been let go and dismissals and early retirement can be expected in defense industries, such as Rafael, the Israel Weapons Development Authority, and Israel Aircraft Industries.

The country’s defense budget, he said is currently 12.9 percent of its gross national product, the smallest ratio since 1967. The $3 billion in American aid was provided by Washington to cover Israel’s defense costs, not improve its social services, Rabin said.

RABIN AFFIRMS SUPPORT FOR LAVI

He spoke of the dispute between Israel and the U.S. over the Lavi, Israel’s second generation jet fighter plane which is financed by the U.S. The Reagan Administration is now urging the Israelis to drop the project on grounds that the aircraft will be too costly to produce.

Cancelling the Lavi, Rabin said, would throw 6,000 people out of work. The plane represents an operational need and also a national need. Without it, Israel’s high-tech industry would suffer a severe setback, he said. At the same time, he stressed, Israel’s high-tech industry must increase production of non-military equipment.

Rabin pointed out that the U.S. has provided between $1 billion and $1.2 billion for the Lavi so far and even if alternative aircraft are found, there could be no replacement in terms of jobs and industry.

The U.S., he said has never told Israel how to spend the aid money, but Israel has voluntarily made sacrifices in the interests of its close relationship with the U.S.

He cited, for example, the Kfir, Israel’s first generation jet fighter. Israel sold exactly 12 of them abroad in 12 years. “We have had dozens of offers, but didn’t sell them because permission was not forthcoming from the United States. Few other countries would have displayed similar loyalty to such agreements with the Americans,” Rabin said.

The U.S. has a veto over Kfir sales abroad because the plane is powered by American-built engines.